Selling A Property With Financing Can We Dissolve The Llc Hawaii Limited Liability Company – How an Operating Agreement Can Avoid Hawaii’s Statutory Rules

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Hawaii Limited Liability Company – How an Operating Agreement Can Avoid Hawaii’s Statutory Rules

Under Hawaii’s Uniform Limited Liability Company Act, there are default rules that apply if your Hawaii limited liability company fails to execute a Hawaii operating agreement. Some of those default rules may prevent a company from taking significant action because of strict consensus requirements, especially if the company has a large membership. That’s why it’s important to have an operating agreement that has rules tailored to your needs rather than being subject to Hawaii’s default rules.

For example, Hawaii Revised Statutes section 428-404(c) specifically provides that certain matters of the business of a limited liability company require the consent of all members. Some of those cases include:

(1) Amendments to the Operating Agreement;

(2) amendments to the articles of organization;

(3) admission of new members;

(4) making interim distributions;

(5) the use of company assets to redeem interest subject to a charging order;

(6) an agreement among members, a member’s obligation to return funds or other property paid or distributed in violation of this chapter;

(7) merger of the Company with another entity;

(8) agree to dissolve the company; and

(9) sell, lease, exchange or otherwise dispose of company property with or without goodwill.

An operating agreement can be used to override such default rules so that only a majority of the members is required instead of unanimity for the aforementioned matters. If you have three or more members, you need an agreement because getting unanimity is easier said than done. Furthermore, the situation of each Hawaii limited liability company may be different, so the contract should be prepared carefully in each situation.

Finally, it should be noted that despite the flexibility an operating agreement can provide for your company, Hawaii Revised Statutes Section 428-103(b) places some limitations on what the agreement can do. An operating agreement cannot:

(1) unreasonably restrict the right of access to information or records;

(2) remove the duty of loyalty;

(3) improperly diminishing the duty of care; and

(4) Exclude the obligation of good faith and fair dealing, but the operating agreement may prescribe standards by which performance of the obligation is to be measured, provided the standards are not manifestly unreasonable.

However, even with respect to the aforementioned provisions, the agreement may set limitations and parameters.

Therefore, you should consult with an experienced Hawaii attorney in corporate law so that you can get an operating agreement structured for your company’s needs.

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